What’s the difference between being “pre-qualified” and “pre-approved”?
Getting Pre-qualified by a lender is an informal measure of how much you maybe able to borrow. It’s a quick process that is based on sharing with your lender your income, your long-term debts, and how large a down payment you can afford. It involves no paperwork and does not obligate you to work with that lender. It’s merely a conversation intended to give you an idea of how much house you can afford.
Pre-approval is a more formal process whereby a lender actually commits to lend to you. The process involves assembling financial records and going through a preliminary approval process. Pre-approval gives you a more specific idea of what you can afford. And when you are ready to make an offer on a home, the lender will prepare a pre-approval letter for you, which demonstrates to the seller that you are serious about the purchase and able to secure a loan.
I’ve found a house I love. How do I make an offer on it?
One of the key activities of a real estate agent is to assist you in preparing and submitting your offer to a seller via their listing agent. After finding out as much as possible about the subject property, the seller’s situation, and any other useful information from the listing agent a formal offer is prepared using a California Association of Realtors Residential Purchase Agreement form, which includes the following information:
· Offer Price
· Amount of Earnest Money Deposit
· Financing Details, include Down Payment Amount
· Proposed Closing Date
· Length of Time the Offer is Valid
· Timeframe for the Removal of Contingencies (inspection, appraisal, loan)
· Allocation (seller/buyer) of Escrow, Title, and other fees
· Items included in the sale.
Can I make a offer to the seller through the listing agent?
It’s perfectly legal for the listing agent to represent both the buyer and seller in a transaction. However, an agent has a fiduciary responsibility to his client and it can be a challenge to fairly represent the best interest of both parties in the negotiation of a contract. Most transactions involve two agents - one representing the seller and the other representing the buyer.
How do I determine what price I should offer?
Arriving at an offer price involves several factors. Of foremost importance is knowing what comparable homes have recently sold for in the area. Additional factors include the home's condition, how many days it’s been on the market, the strength of your financing, and the seller's situation.
Does it cost anything to make an offer?
When submitting an offer to purchase a house, an offer is given greater consideration when accompanied by a loan pre-approval letter, proof of funds, and a photocopy of a check for the earnest money that will be delivered to escrow should the seller accept the offer. The amount of the earnest money deposit is customarily 3-5% of the purchase price. The deposit is a sign of good faith that you are seriously interested in the property and indicates that you have the financial qualification to make a serious offer. Once the purchase agreement is fully executed, a physical check for the deposit must be delivered (or wired) to escrow, normally within 3 business days, where it is kept until closing and is applied toward the down payment.
Can I lose my earnest money deposit?
Although it is possible for a buyer to lose their earnest money deposit, it’s rare. The California Association of Realtors Residential Purchase Agreement is a contract whose language includes many protections for the buyer including multiple contingencies, which, if not met, permit the buyer to walk away from the deal and keep the deposit. These contingencies include inspection (you have the right to learn the full condition of the property), appraisal (your lender will want assurance the home is worth the amount that they’re lending you) and financing (you need to successfully get a loan). If all contingencies are satisfied and you opt to walk away from the purchase, the seller may have the right to demand your earnest money deposit.
How much will I need for a down payment?
A “conventional” mortgage is one that includes a down payment of at least 20 percent of the purchase price. For those without that much cash available, there are other loans that require as little as 3.5 percent down. However, mortgages with less than a 20% down payment generally require a mortgage insurance policy to secure the loan. When considering the size of your down payment, keep in mind that you will also need money available for closing costs.
What kind of inspections are needed and how much do they cost?
There are several types of inspections, though they’re not all necessarily required, and their costs vary based on the specifics of the property. For an average sized single family residence, a physical inspection, which focuses on the structure, construction, and mechanical systems can cost around $350-$450. A sewer inspection will cost approximately $250. A foundation inspection will be around $150-$200. The fees for the inspections are not included in the transaction closing costs. They must be paid directly to the inspector at the time of the inspection.